The FSA has outlined plans to ensure key messages about the service mortgages intermediaries offer and their charging structures are clearly given to clients, including oral disclosures for some advice streams.
This means use of the initial disclosure documents (IDD) will be scrapped but firms can still use them as the basis for communicating with clients and conveying the key messages if they wish.
In its consultation paper on MMR proposals, the FSA says information about a firm's remuneration options and the scope of its service will have to be given in the initial contact between the firm and consumer.
Initial service disclosure requirements for firms will also have to be provided in a durable medium to protect consumers.
The FSA says: "It is also intrinsically in a firm's interest to ensure these matters are documented. So we propose that the information is given in a durable medium in the initial contact where practicable, or five working days following the initial contact where it is not, for example, in the case of telephone sales."
The regulator says the current IDD (initial disclosure document) can meet the requirement to provide the information in a durable medium if firms wish.
This may allow them to minimise costs and it would also allow them to
provide other relevant services to consumers (e.g. retail investment advice, insurance advice) and give a combined IDD if this suits their operations.
The FSA Handbook will continue to contain IDD templates as guidance to firms but they would not be compulsory, and firms may choose to give the information in another durable format.
As well as the durable documents, firms will also have to clearly and
prominently emphasise their key messages to consumers.
Where firms have spoken interaction with consumers, the FSA proposes requiring them to tell clients about their scope of service and the basis of their remuneration orally.
If there is no spoken interaction, there will be other requirements that firms display these messages clearly and prominently at the start of the sales process.
The FSA warns for firms communicating over the internet, pages that provide an IDD through a link will not be enough to meet requirements.
Instead, they will have to display the messages on a webpage that all consumers cannot avoid as part of going through the initial stage of the on-line sales process.
Firms communicating by post will have to set out these messages clearly and prominently in a communication separate from the IDD.
This consultation paper (CP) is the third following the MMR discussion paper published in October last year. The first two CPs dealt with 'arrears and approved persons' and 'responsible lending'. This paper (READ IT HERE) deals with 'distribution and disclosure'. Consultation for this paper closes 25 February 2011.
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